How do you choose the right structure for your business?
Starting a new business follows a long list of things to do. Since you know part of your business, I want to discuss an important part of this setup - choosing the right business structure. See the main business buildings in India.
Choosing one from a variety of sources can be a daunting task. However, clarity on business vision and level makes this option easier. You need to know the level of control you want, the level of compliance you can follow, the amount of investment you will need, and more.
Business structure greatly affects the success of your business. Although you can change it later, you should make a wise first choice. You need to visit and review the many factors that determine the right business structure. Here are some of the things described:
Number of owners
Your options are filtered to this point. Here's a simple classification of properties based on the number of owners.
Credit level and personal risk
Risk level is associated with activity and business scale. Owners may want to protect their risk when the associated risk is high. Proper business structure can reduce the risk to the owner. When a partnership is selected, the risk is divided between multiple partners. In addition, companies and LLP completely protect the liability of owners without a few exceptions. Therefore, only the owner who wants to reduce the person's risk may choose One Person Company.
Business decision management
Owners are certainly interested in managing business decisions. Partnerships also divide control among many partners. Partnerships provide flexibility. Therefore, partners can determine different rights and obligations for all.
In companies, the director (s) have direct control of the transaction. And for this reason, in most private companies, shareholders and directors are the same. This also applies to OPC.
You can set your control level with your coordinator in your preferred format. However, you can only get separate divisions in ownership.
The ability to grow or borrow money
If a business is aimed at having a high growth rate it requires large investments in various categories. The business itself may not generate all the money itself. Therefore, the ability to attract investors or to get a loan is very important. Investors and banks prefer to borrow their money from more organized companies, as these businesses are often the safest investment. VCs and Angel Investors often prefer Private Companies to invest because of financial ownership.
Registration and storage costs
The cost of registration in most cases is very similar. However, Proprietorship firms are easy and inexpensive to build. Since registration is a one-time expense, you should focus on maintenance costs. Includes compliance costs. The level of compliance in the company is very high, followed by LLP. Ongoing compliance with events is provided under the law. However, you may want to relax the cost of benefits provided by a particular property.
Companies and LLP are the most reliable structures. Professional certificates and intermediate registration give them high reliability. In addition, financial and other data are accessible to the public. Therefore, third parties can easily rely on such structures. However, a structure such as ownership alone has very little reliability. Rather it depends on the honesty of the owner.
Continuity of existence
Businesses are heavily dependent on promoters. However, it affects business survival. For new businesses, it may not be so important. However, it is important in the future, in particular, to earn money. Investment agencies prefer business continuity with safe investment. It is best offered by Companies and LLPs. Driver stage businesses can choose an informal structure that is easy to modify later.
There is a defined tax structure for each form. Some properties that are separate legal entities are directly taxed. As a company and LLP. The co-operative firm is also a separate organization for tax purposes. All of these forms attract 30% basic tax (excluding small company @ 25%). Proprietorship company income is taxed on a slab of 5 to 30% of the basic exemption limits. You need to understand the structure of taxation of any kind in order to properly manage tax liabilities.
Some business entities need to make all documents part of the public record, accessible to all. While the company's documents are fully accessible to the public, the LLP Agreement remains confidential. If you wish to disclose your business details, choose your business structure carefully.
These factors should be measured by comparing the various business units of the business. No proper company structure can guarantee the completeness of these things. However, if you can prioritize the things that are most important to you, you can choose a structure that best suits your business needs. If you are having any difficulty finding the right business structure, feel free to contact LW professionals.